EU-Georgia Free Trade Agreement Takes Step Closer to Reality

The EU finally launched negotiations on the “Deep and Comprehensive Free Trade Agreement” with Georgia and Moldova on December 12 in Brussels. According to the sides, the agreement will significantly bolster economic growth and FDI inflow.

"We want to establish a stable and solid framework for closer economic ties with Georgia and Moldova" the EU Trade Commissioner Karel De Gucht said. "A deep and comprehensive free trade area will help Georgia and Moldova to become more competitive and enjoy the benefits of the EU Single Market."

"This kind of economic integration is one of the cornerstones of our relations with countries of the Eastern Partnership," Commissioner for Enlargement and European Neighbourhood Policy Stefan Fule said. "Moldova and Georgia have achieved sufficient progress with the necessary reforms and have fulfilled a set of conditions to be able to proceed further in gradual economic integration with the EU internal market."

According to the EU the agreement with the most successful Eastern Partnership countries [Georgia and Moldova] will enhance political stability and deepen economic integration with the EU. The free trade areas are expected to diversify and strengthen Georgia and Moldova's export capacity and effectively open the EU market of 500 million consumers. These are essential to improve foreign direct investment inflows, bring jobs and long-term growth.

Projected gains for Georgia and Moldova lie therefore behind the border and as such will impact their long-term development prospects. At the end of this process the two countries could see their GDPs significantly enhanced.

Both countries currently enjoy preferential access to the EU market through autonomous lower import duties through the Generalised System of Preferences with further incentives for good governance ("GSP+") (Georgia) and Autonomous Trade Preferences (Moldova).

These free trade areas will be part of the Association Agreement, under negotiation with Georgia and Moldova since July 2010 and January 2010, respectively, in the framework of the Eastern Partnership and the European Neighborhood Policy.

The current trade balance data between Georgia and EU is significantly lower in comparison to the Commonwealth of Independent States (CIS) and Black Sea Economic Cooperation (BSEC) member states. According to the Georgian Department of Statistics exports as of the third quarter of 2011 were USD 89.990 millions, and imports were USD 564.610 millions also as of October 2011.

Prime Minister Nika Gilauri stated that the Russian factor is important regarding stating the negotiations, as Russia has been trying to isolate Georgia over the last three years.

“Today it has been proven that the attempt has ended in absolute failure. Georgia today is closer to Europe than it has ever been before. This proves that Georgia is becoming a full-fledged member of the EU; free trade creates the economic integration of Georgia and EU. Though Russia is trying to isolate Georgia from Europe, the opposite seems to be happening, the EU declares that Georgia and the EU are to sign a deep and comprehensive free trade agreement”, Nika Gilauri said.

The Georgia-EU negotiations opened yesterday in Brussels. Minister of Foreign Affairs of Poland Radoslaw Sikorski and Prime Minister of Moldova Vlad Filat attended the opening of the consultations.

Deputy Foreign Minister Tornike Gordadze also agreed with the statement of PM Gilauri about the Russian factor, and also described the prospects of the free trade regime with the EU.

“I would like to add that the EU is in a condition of deep financial crisis, nonetheless all the EU states managed to find a consensus to open the talks on the FTA. Though this agreement refers to economic matters, this is also a huge political support of Georgia” Gordadze said from Brussels.

“It is obvious that EU-Georgian relations have been fruitfully developed over the last year in particular”, he added.

According to him the first round of the negotiations is supposed to start at the beginning of 2012. Gordadze also expressed hope that negotiations will not stretch on for years, and be completed in 2013, since the Georgian side has implemented an essential part of the recommendations.

Georgian analysts univocally welcome this initiative. According to Kakha Gogolashvili, as a result of this agreement Georgia will become a complete member of the EU economic space, thereby becoming an attractive country for foreign investors.